Dairylea administrator admits she stole $600,000 from farmers' co-op

A former administrator at Dairylea Cooperative admitted Wednesday that she embezzled nearly $600,000 from the company over seven years.

Cheryl Nelli, 54, of 3315 E. Genesee St., DeWitt, pleaded guilty in federal court to mail fraud for diverting Dairylea payments from May 2002 to May 2009, when she worked as the cooperative's producer payments administrator.

The cooperative collects milk from its 2,300 dairy farmer members and sells it to processing companies. The cooperative then pays the farmers for the milk every month. It also provides a service for the farmers in which it takes an amount of the monthly payments and pays other expenses on a farmer's behalf, such as his mortgage or credit card bills.

Nelli admitted she'd been inflating the total amount owed to the farmers and for their other third-party expenses, then creating phony third parties which she would pay, according to Assistant U.S. Attorney Edward Broton. The payments went directly to Nelli, to her bank account or to credit card accounts she controlled, according to court papers.

The farmers were paid the proper amount they were owed each time, Broton said. In a few cases, Nelli miscalculated and overpaid the farmers, he said. But that amounted to only about $20,000 of the $595,000 she stole, he said. Dairylea is not seeking repayment for those amounts, he said.

The embezzlement was discovered when a farmer noticed an irregularity in his account, Broton said. That farmer notified Dairylea, which conducted an audit.

Nelli was a staff accountant at Dairylea when she started the scam in 2002, and was promoted to an administrator shortly afterward. She could not be reached for comment.

Once Dairylea discovered the fraud, Nelli was immediately fired, according to Karen Cartier, a spokeswoman for the cooperative.

"There was no financial harm to members, and the Cooperative expects to recover the funds," Cartier said in a written statement. "Numerous and comprehensive efforts are in place to prevent such incidents from happening in our organization."